Monsoon Journal

By Michael Bowman America’s battered housing industry is showing signs of life, according to new U.S. government statistics. U.S. home sales recorded the largest monthly increase in more than eight years, rising 11 percent in June, according to the Commerce Department. It was the third consecutive month of rising sales. Global Insight economist Nigel Gault says the sales jump is a welcome sign of improvement in an industry that has suffered its worst slump in decades. “The signals, at least on the home sales front, are pretty clear. We hit bottom sometime during the first half of the year, and we are now on the uptrend,” Gault said. Even so, home values continue to decline. The median sales price in June was $206,000, down from $219,000 in May and $234,000 a year ago. Nigel Gault says, over time, a revival of home sales will revitalize the entire industry. “The housing market is stabilizing. Sales are starting to pick up. And as a result, builders are also starting to increase their construction of new homes,” Gault said. From 2003 through 2007, a housing boom boosted the U.S. economy, spawning construction across the country and providing millions of American homeowners with equity that many used to finance everything from home improvements to new cars. But the housing market crashed in 2008 amid a rash of mortgage defaults and home foreclosures that triggered last year’s financial meltdown and helped send a faltering U.S. economy into a deep, prolonged recession. [VOA News]

GTA May Resale Housing Sales Higher Than Last Year In May 2009, Greater Toronto REALTORS® reported 9,589 sales, up almost two per cent from May 2008 - the first annual increase since December 2007. The seasonally adjusted annual rate of sales in May was 81,300. “The resale housing market in the GTA has remained resilient in the face of challenging times globally,” according to TREB President Maureen O’Neill. “Many home buyers have taken advantage of extremely low mortgage rates.” The average price for May transactions was $395,609 - down less than one per cent compared to the same month last year. “The average resale home price has moved in line with last year’s level because of tighter market conditions experienced this Spring,” stated Jason Mercer, TREB’s Senior Manager of Market Analysis. “Home sales have increased strongly relative to new listings, bolstering home prices.” Seasonally adjusting TREB MLS® data removes recurring seasonal trends observed each year. For example, MLS® sales are highest in late spring each year and lowest in the winter months. Removing the recurring seasonality, allows for the analysis of a meaningful trend reflecting actual changes in market conditions. By multiplying the monthly seasonally-adjusted figure by 12, creating an annual rate, we can compare how the current month relates to historical annual figures. Median Price In May the median price was $337,000, from the $338,000 recorded during May of 2008. (Courtesy: Toronto Real Estate Board)

Bank of Canada Rate Unchanged Bank of Canada maintains overnight rate target at 1/4 per cent and reiterates conditional commitment to hold current policy rate until the end of the second quarter of 2010 The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1/4 per cent. The Bank Rate is unchanged at 1/2 per cent and the deposit rate is 1/4 per cent. Information received since the Bank’s April Monetary Policy Report (MPR) is broadly consistent with the Bank’s medium-term outlook for output and inflation in Canada. The economy is undergoing major restructuring in a number of sectors. The already significant output gap will continue to widen through the third quarter, putting downward pressure on inflation. The Bank continues to expect that the global and Canadian recoveries will be more muted than usual. In recent weeks, financial conditions and commodity prices have improved significantly, and consumer and business confidence have recovered modestly. If the unprecedentedly rapid rise in the Canadian dollar (which reflects a combination of higher commodity prices and generalized weakness in the U.S. currency) proves persistent, it could fully offset these positive factors. The outlook is subject to considerable uncertainty. While the underlying macroeconomic risks are roughly balanced, the Bank judges that, as a consequence of operating at the effective lower bound, the overall risks to its inflation projection remain tilted slightly to the downside. Conditional on the outlook for inflation, the target overnight rate can be expected to remain at its current level until the end of the second quarter of 2010 in order to achieve the inflation target. The Bank retains considerable flexibility in the conduct of monetary policy at low interest rates, consistent with the framework outlined in the April MPR. Information note: The next scheduled date for announcing the overnight rate target is 21 July 2009. A full update of the Bank’s outlook for the economy and inflation, including risks to the projection, will be published in the MPR on 23 July 2009. (Courtesy: Bank of Canada)